For aam aadmi and infotech business alike, technology provisions a disappointment in new Indian government's maiden budget

10th July 2014
For aam aadmi and infotech business alike, technology  provisions  a disappointment in  new Indian government's maiden budget
IT's in the bag! Indian Finance Minister Arun Jaitley ( left) and Commerce Minister Nirmala Sitharaman, en route to unveiling the national budget, June 10 2014

An IndiaTechOnline Budget Special
New Delhi June 10 2014 ( updated 0600 IST June 11):  Viewed through the filter of  information technology, the maiden budget of the new government in Delhi  appears to be a  rainbow of  IT-driven promises.
Switch  the filter to what it held out for the Infotech industry that has done the country proud  for 13 years and a half  of the new millennium  and it was  a mix  of deja vu and dejection -- election-time hype and promise  conveniently forgotten,  the  record of the last five years of the previous dispension, unapologetically  replayed.
There was a  piddling tax reduction here and there  but no substantial  change in a policy that has hamstrung  the technology business for  nearly a decade

First  the good news:
A pan India programme, “Digital India” to with an outlay of  Rs 5 billion ( 500 crore) is to to be launched. " This would ensure Broad band connectivity at village level, improved access to services through IT enabled platforms, greater transparency in Government processes and increased indigenous production of IT hardware and software for exports and improved domestic availability". A special focus would be given on supporting software product startups. 
Another programme for  something vaguely  called  “Good Governance” to be launched, with an allocation of Rs 1 billion ( 100 crore).
Government has also proposed to set-up A National Rural Internet and Technology Mission for services in villages and schools, training in IT skills and E-Kranti for government service delivery and governance scheme with an initial corpus of Rs.  5 billion (500 crore).
Smart Cities:  A sum of  Rs 70 billion ( 7060 crore) is provided in the current fiscal for the project of developing “one hundred Smart Cities’
An initial sum of Rs  1 billion (100 crore) has been allocated to set up a technology development fund to provide necessary resources to public and private sector companies, including SMEs, as well as academic and scientific institutions to support research and development of Defence systems that enhance cutting-edge technology capability in the country. 

Taxation: Colour picture tubes have been exempted from basic customs duty to make cathode ray TVs cheaper and more affordable to weaker sections. To encourage production of LCD and LED TVs below 19 inches in India, basic customs duty on LCD and LED TV panels of below 19 inches has been reduced from 10 percent to Nil. 
Components used in making PCs have been exempted from the 4% special additional duty.
Basic customs duty on e-book readers reduced to nil from 7.5%. 
Some 400 "permissions" for setting up of a Community Radio Stations have been issued and to encourage further growth in this sector, a new plan scheme has been launched with sum of Rs 1 billion (100 crore) to support 600 new and existing Community Radio Stations. 
A “National Centre for Excellence in Animation, Gaming and Special effects" will be set up.  The Government has announced to set-up five more IITs in the Jammu & Kashmir, Chattisgrah, Goa, Andhra Pradesh and Kerala. Similarly, five new IIMs will be set-up in the States of Himachal Pradesh, Punjab, Bihar, Odisha and Maharashtra. For this, a sum of Rs. 5 billion ( 500 crore)  has been allocated in the Budget.

Now the mixed news:
"To boost domestic production of electronic items and reduce dependence on imports,  new customs duties "on certain items outside the purview of IT Agreement, exemption for inputs/components in PC manufacturing from SAD, imposition of education cess on imported electronic products for parity etc."  In other words it's  give with one hand and take back with the other. Imposing 'education cess" on imported electronics is just another backdoor taxation measure. Mr Jaitley is not much different from  the policy of his predecessor in  largely ignoring the aam aadmi's craving to empower himself or herself with information and communication technology, or government's grand vision to  use IT  to  remove inequalities. These remain pious principles with no drastic  measures to make it happen. A small fall in the price of a phone or tablet  will be outweighed  by increases in the cost of connectivity as telecom operators  have been made to pay very high price for spectrum.

The  really bad news is what was left unsaid or unaddressed and we are grateful  to Veerasundar Veluswamy EVP & Chief Financial Officer CSS Corp for  reminding us:
" No major incentives for  IT/ITES industry. Contrary to industry expectations, Minimum Alternate Tax (18.5% including surcharge & cess) still continues to apply for Special Economic Zones . Also there was no indication about  time lines for removal or reduction of MAT rates. There is no change in the Corporate Tax rates (domestic companies almost 34% & foreign companies close to 43%). Industry expectations is that the Government would take steps to align India's direct tax rates in line with those in ASEAN to make Indian Industries   internationally competitive. Non Deductibility of mandated 2% CSR expenditure for Income tax purposes "

Against all expectations, the Finance Minister has left untouched the  indefensible   retrospective amendments to corporate taxation provisions which have see  global companies caught in a maze of appeals and  legal cases extending beyond Indian courts. 

As we get clarity on the budget provisions  on closer reading, we will share or refine  our take with readers.
A separate story   carries industry  reactions.
Link to Finance Minsiter's Budget speech here